In a certain economy, when income is $100, consumer spending is $60. the value of the multiplier for this economy is 4. it follows that, when income is $101, consumer spending is

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Business

Gidget

22 July, 03:51

In a certain economy, when income is $100, consumer spending is $60. the value of the multiplier for this economy is 4. it follows that, when income is $101, consumer spending is

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Kasen Jarvis · Answer 1

The multiplier is the factor by which gains in total output are greater than the change in spending that caused it. It is used in reference to the relationship between investment and total income. Let us with C denote the change in consumption and with Y the change in income. If consumption increases by X then the multiplier is:

multiplier=1/1 - spend

4=1/1-spend

1-spend=4 spend=-3